Chapter 5

HEALTH FINANCE AND MANAGED CARE SYSTEM

Health Maintenance Organization(HMO)- is a type of managed health care system. It has

a goal f reducing health care costs and on preventive care and implementing utilization
management controls.

Primary Care Physician- he is your first contact when you join an HMO. He provides
your general medical care before you consult the specialist.

DEFINITION OF HEALTH CARE FINANCING

-It refers to a system that pays even first Peso/Dollar health care cost on a
collective basis via employer or government funding.

CURRENT TRENDS AND GROWTH OF ALTERNATIVE METHODS OF HEALTH

CARE FINANCING IN THE PHILIPPINES

One way of describing the financing of health system is by identifying the major
providers of health services and the role played by the government. The government is
the major/sole provider of health services.
Furthermore, for market commodity, some aspects of health care may be financed
directly by consumers through a system of user charges or fees for service. On the other
hand, as a social good, aspects of health care may be directly financed by the government
through public subsidy program supported by general on specific taxes.
There may also be cases of private sector participation as deliverers of specific
health services for particular groups.

Below is a brief overview of the various options for financing health care:

USER CHARGES- these means of financing health care are particularly suited
for those aspects for health care that are considered private goods.

PUBLIC SUBSIDY- the most appropriate for those aspects of health care whose
benefits are widely spread and therefore not quite amenable to a system of user charges.

COMMUNITY FINANCING- this has been demonstrated to be effective not only

to mobilizing resources for health care, but also evoking improved health consciousness
among community members and stimulating collective action to achieve common health
goals.

HEALTH INSURANCE- this is relatively more complex and structured form of

health financing based on a system risk sharing.

INVOLVEMENT OF PRIVATE SECTOR- a response to a market need for

demand for services with corresponding willingness to pay. This type of involvement is
largely influenced by market factors but also encouraged by government.
FINANCING HEALTH SERVICES IN THE DEVELOPING COUNTRIES:

What should governments of developing countries do to cope with the present

crisis in the financing of health services?

In order for governments to do this especially in developing countries, these three

options should be considered or rather be included in their health plans:
1. Mobilizing additional resources from outside the Health sector.
2. Mobilizing additional resources from within the Health sector.; and
3. Altering the organizational Make-Up of the Health sector.

HEALTH INSURANCE:

VOLUNTARY HEALTH INSURANCE- the government provides or gives access to

the poor people to the same health services as were used by the better off.

COMPULSARY HEALTH INSURANCE- was first introduced in Germany in 1883.

Employers were forced to pay, as well as employees in order to have access in health
care or health services.

HEALTH INSURANCE AND POLITICAL ABILITY:

Below are some considerations concerning Health Insurance :

If your country already has health insurance:

• Does it include prevention?
• Is it built on primary health care principles?
• Does it promote equity or create privilege?
• What say has the Ministry of Health about its resources and how it uses them?
• What would it cost to give the uninsured the same services as the insured?
• How could health insurance be adapted to conform better to health-for-all
objectives?

If your country has no health insurance:

• Is there a social security scheme on which it could be built?
• What could the insured be offered for their contributions without undermining
health-for-all goals?

Health Care can also be financed by:

• Obtaining more tax revenues, possibly as earmarked taxes
• Attracting more external cooperation
• Requiring employees to provide defined services
• Encouraging fund-raising by NGO’s
• Stimulating community financing and voluntary health insurance
• Economizing through more efficient use of resources
 • Re-orienting priorities within existing service or selecting less costly methods of
service delivery.
If your country does not have a financial master plan, you may wish to consider:
• Distributing to key officials and training institutions the WHO manual on this
subject.
• Holding seminars to promote awareness among senior staff about the importance
of financial planning.
• Including an element of financial planning in courses of health management and
health planning.
• Undertaking a study on health financing and health expenditures in your district
or country.
• Contracting institutions that can provide basic training for the health sector’s
financial planners, providing fellowships for such training, and developing a
training programme.
• Reviewing the financial implications of your daily work, where do your financial
resources come from, do you spend them wisely and are additional resources
available locally?

OUT-OF-POCKET / FEE-FOR-SERVICE

OUT-OF-POCKET = payments made by individuals or their family, rather than

an insurance company, HMO, government or other third party, for medical care.

FEE-FOR-SERVICE = is a method of charging whereby a physician or other

practitioner bills or services.

MEDICAL INSURANCE

INSURANCE = method of pooling risk so that one person’s loss is shared across
many people rather than being borne by the person alone.

HEALTH MAINTANCE ORGANIZATIONS AND OTHER MANAGED CARE

ORGANIZATIONS

HEALTH MAINTANCE ORGANIZATION ACT = was passed on 1973 providing

federal funding for health maintenance organizations that followed the federal
regulations, which were stricter than the state regulations.

HEALTH MAINTANCE ORGANIZATION = one type of managed care service that

provides health care to members for a fixed, usually monthly payment.

1. PREFFERED PROVIDER ORGANIZATION (PPO)

Another type of managed care service that used as provider networks to deliver
health care to its members. A PPO plan includes preferred provider physicians,
insurers and employers.
 2. EXCLUSIVE PROVIDER ORGANIZATION
-A plan that requires its members to get their services within that particular network only.
The participants usually must select a primary care physician and a hospital that they will
use exclusively.

3. CAPITATION
Is another, and relatively new, type of health care plan that is becoming popular.
With capitation, the ensurer or employer will pay a provider a set free for all the medical
expenses necessary for each member covered under that plan.

4. POINT OF SERVICE (POS)

A Point-of-Service medical plan is basically a combination of a PPO and HMO. They
key to POS plans are established to provide lower cost medical care to those that
remain in the provide POS’s are structured in the same way as PPO medical plans. As
with HMO plans, POS plans typical preventive care and health improvement
programs.

OUT-OF-POCKET HEALTHCARE FINANCING

-health care costs paid out of your own pocket without limitation. In other words,
it is the commonly type of payment most patients has to pay.

ADVANTAGES:

1.MINIMUM COSTS
- It is merely depend on the primary care physician who attend for your treatment
and healthcare institution where you have been admitted. The shorter you treated the
lower payment.

2. NO “GATEKEEPER” FOR NON-NETWORK CARE

-if you prefer to go outside the network for treatment, you are free to see any
doctor or choose without first consulting primary care physician.

DISADVANTAGES:

1.HIGH-OUT-OF-POCKET COSTS
-with most types of insurance, you are responsible for paying the amount of the
bill every time you receive medical care excluding the value of free medical goods.

2.LESS COVERAGE FOR TREATMENT PROVIDED BY PHYSICIAN

-there is a strong financial incentive to use other network physician. But members
may receive some reimbursement for care obtained from network physicians but only for
treatment provided by non-network physicians.

3.NO FREEDOM OF CHOICE

 -for example, your patient could not choose the primary care physician he would
like to attend for his treatment. These case mostly happen to the patients who has no
ability to pay the required physician they like.

CONCEPT OF MEDICAL INSURANCE

Insurance modifies the nature of the economic exchange by redirecting the flow
of money. It changes who negotiates prices, who bears responsibility for mistakes, and
who has the right to profit from directing business to one hospital rather than another.

COSTS AND PRICING OF MEDICAL INSURANCE: ACTUARIAL (MEDICAL)

COSTS AND ADMINISTRATIVE COSTS

Section II, Article XIII of the 1987 constitution of the Republic of the Philippines –
declares that the state shall adopt an integrated and comprehensive approach to health
development which shall endeavor to make essential goods, health and other social
services available to all the people at affordable cost.

NATIONAL HEALTH INSURANCE PROGRAM(NHIP) – refers to a compulsory

health insurance program of the government as established in the National Insurance Act
of 1995 (Republic Act. No. 7875), which shall provide universal health insurance
coverage and ensure affordable, acceptable, available and accessible health care services
for all citizens of the Phil.

In the pursuit for a National Health Insurance Program (NHIP), this revised
Implementing Rules and Regulations shall adopt the ff. guiding principles:

a. The NHIP shall underscore the importance for government to give priority to
health as a strategy for bringing about faster economic development and
improving quality of life.
b. The NHIP shall provide all citizens with the mechanism to gain financial access
to health services, in combination with other government health programs.
c. The NHIP shall give the highest priority to achieving coverage of the entire
population with at least a basic minimum package of health insurance benefits.
d. The NHIP shall adequately meet the needs for personal health services at various
stages of a member’s life.

COST AND ADMINISTRATIVE COSTS

COST- a sacrifice of resources and it is a measurement in monetary terms of the

amount of resources used for some purpose.

The benefits under NHIP shall consist of the following:

1.Inpatient hospital care
2.Out patient care
3.Emergency and Transfer Services; and
4.Such other health care services that the corporation determines to be appropriate and
cost effective.

HEALTH MAINTENANCE ORGANIZATION: an off-shoot of medical insurance and

emphasis on preventive and promotive healthcare

ADVANTAGES OF HMO’s
1.Low out-of pocket costs
2.Focus on wellness and preventive care
3.Typically no-lifetime maximum pay-out

DISADVANTAGES OF HMO’s
1.Tight controls can make it more difficult to get specialized care
2.Care from non-HMO provide generally not covered

GROWTH AND TRENDS OF THE HMO INDUSTRY

GROWTH OF HMO’s FROM 1970 TO 1994

1970 33 3,600
1975 148 5,600
1976 175 6,000
1977 165 6,300
1978 203 7,500
1979 215 8,200
1980 236 9,100
1981 243 10,200
1982 265 10,800
1984 306 15,100
1985 393 18,900
1986 595 23,700
1987 700 29,000
1988 653 30,300
1989 591 34,500
1990 569 36,500
1991 550 40,400
1992 562 44,300
1993 541 49,100
1994 546 56,800

EMPHASIS ON EFFICIENCY AND OUTCOMES

EFFICIENCY- in economics, it refers to the ratio of output to input.

ECONOMIC EFFICIENCY-is the ratio of the value of its product to the value of input of
resources.
Thus, the greater the ratio the greater is economic efficiency.

MEDICAL TECHNOLOGY EVALUATION

MEDICAL TECHNOLOGY EVALUATION-evaluates the vital information about the

risks, benefits and cost for new technologies in order to make informed decisions abut
which ones to adopt and how to use them.
It includes methods like randomized controlled trials, meta-analysis, economic
evaluation methods (cost-benefit, cost effectiveness and cost-utility analysis).

COST BENEFIT ANALYSIS-one method for economic evaluation which can effectively
indicate whether a health care treatment or intervention is worthwhile.

Reporters:

 Ser Francis Acosta

 Keith Randolf Cruz
 Michael Alvin Cruz
 Jeffrey de Guzman
 Jeffrey de Jesus